After Goldman Sachs and Citigroup, Bank of America Merrill Lynch on Wall Street also made the strongest bullish call on copper.
On Friday local time, analysts including Jason Fairclough from Bank of America Merrill Lynch released a deep industry report, stating that copper prices are expected to rise to $12,000 per ton by 2026, more than 20% higher than current levels, which is closest to Citigroup's forecast. Goldman Sachs, on the other hand, believes that copper prices could reach this level ahead of schedule by the end of the year.
The report points out that due to energy transition, growing demand from India, and the rise of AI and data center construction boom, the market demand for copper is soaring, forecasting that by 2026, the global supply-demand gap will double to reach 743,000 tons.
Bank of America Merrill Lynch is generally optimistic about copper mining companies, giving Freeport-McMoRan Copper &amp; Gold, Antofagasta, Ivanhoe Mines, Zijin Mining, Jiangxi Copper and other major players a buy rating. Quality copper assets &#34;hidden&#34; in integrated miners such as Teck Resources, Anglo American, and Glencore are worth paying attention to.
The institution also believes that once copper prices rise, smaller, higher-cost companies like KGHM may see more significant profit growth.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d3d27371-3986-4ca9-acb0-eb9859305c97.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/d3d27371-3986-4ca9-acb0-eb9859305c97.png"/>
<h2>Supply Gap Could Double by 2026</h2>
The report titled &#34;Everybody wants copper&#34; reflects its optimism about copper demand.
Bank of America Merrill Lynch pointed out that BHP recently launched a century-old acquisition bid for Anglo American, which has made the market fully aware of one thing: as expectations of soaring copper prices rise, high-quality copper mining assets are becoming increasingly scarce, and the value of controlling copper resources is also increasing day by day.
The report states that the world is currently accelerating its pace towards energy transition, with the core of this process being &#34;decarbonization.&#34; To achieve this goal, the demand for metals like copper will significantly increase.
Furthermore, the rise of emerging economies such as India, as well as the rapid development of emerging industries like artificial intelligence and data centers, will also provide strong support for copper prices.
Against the backdrop of a tight copper supply, Bank of America Merrill Lynch predicts a deficit of 324,000 tons in copper supply and demand by 2024, which is expected to increase to 743,000 tons by 2026
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ed60a888-9043-42b1-80a3-50cbc1adcd2e.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/ed60a888-9043-42b1-80a3-50cbc1adcd2e.png"/>
<h2>High-quality Pure Copper Mining Companies: A Look at Freeport-McMoRan and Southern Copper</h2>
Bank of America Merrill Lynch pointed out that the valuation of copper mining companies is influenced by various factors, including fundamental factors such as costs and reserves, as well as market factors such as scale and liquidity. High-quality companies that excel in all aspects will receive a higher valuation premium, making them worthy of investors' attention.
In their valuation analysis of major global pure copper mining companies, Bank of America Merrill Lynch introduced a new valuation indicator: Enterprise Value (EV) per ton of copper production capacity, abbreviated as EV/ton.
Through calculations, Bank of America Merrill Lynch found that the average value of each ton of copper production capacity is approximately $55,000.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/65221eac-821d-4cc0-ae3a-e8fada537a1f.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/65221eac-821d-4cc0-ae3a-e8fada537a1f.png"/> However, there is a significant difference in EV/ton among different companies, mainly depending on the following factors:
<blockquote>
Cost Position - Lower costs often lead to higher EV/ton.
Mine Life - Longer mine life leads to higher EV/ton.
Location - Different countries and regions have different political and economic risks, resulting in differences in EV/ton.
Equity &#34;Packaging&#34; - EV/ton for listed companies is usually higher than non-listed companies.
</blockquote>
At the company level, Bank of America Merrill Lynch pointed out that the EV/ton of the two major listed copper mining giants in the United States, Freeport-McMoRan and Southern Copper, exceeds $90,000, significantly higher than the industry average.
<h2>Mining Giants: The &#34;Hidden&#34; Value of Quality Copper Assets Should Be Recognized</h2>
For large diversified mining companies, Bank of America Merrill Lynch continues to use the EV/ton indicator to derive the implied value of their quality copper businesses.
The analysis shows that the value of these mining giants' copper businesses is quite substantial but often overlooked by investors:
<blockquote>
BHP, with an annual production capacity of about 1.4 million tons of copper, estimated valuation may range from $79 billion to $96 billion based on the EV/ton indicator.
Anglo American's copper business, although smaller than BHP with an annual production capacity of about 700,000 tons, could still reach a valuation of $41 billion to $50 billion.
As for Glencore, with an annual production capacity of about 860,000 tons of copper, the implied value could be between $49 billion and $59 billion.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e9431154-6799-4eb7-a638-48aff8815712.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/e9431154-6799-4eb7-a638-48aff8815712.png"/>
</blockquote>
These numbers clearly indicate that the copper businesses of diversified mining companies are not just &#34;side businesses&#34; but rather significant &#34;value pockets.&#34; However, due to the diverse nature of these companies' operations, the value of their copper businesses is often underestimated by the market
<h2>These Copper Companies Have Great Profit Elasticity</h2>
Bank of America Merrill Lynch particularly mentioned a type of copper mining company in its report, namely those &#34;non-first-tier&#34; copper mining companies with relatively high production costs.
Compared to industry leaders, these companies have higher costs, which means relatively lower profit margins; shorter mine asset life, with uncertain future sustainable profitability; smaller scale, lacking economies of scale effects; higher asset-liability ratio, with relatively greater financial risks.
From an investment perspective, these producers seem to have lower &#34;quality&#34;. For example, companies like Poland's KGHM Group and Spain's Atalaya Mining have an EV/ton of less than $20,000.
However, once copper prices rise, the potential for profit growth may be greater. Bank of America Merrill Lynch points out that these stocks may have another attraction, namely higher price leverage.
Price leverage refers to the impact of copper price changes on company profits. Bank of America Merrill Lynch believes that for high-cost producers, when copper prices rise, their profit growth may be more significant.
Assuming a 10% increase in copper prices, KGHM's EBITDA in 2025 could increase by 26%; Atalaya Mining's EBITDA growth next year could also reach 25%.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8e0e3d51-1d55-451c-b3c6-431e568f136d.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/8e0e3d51-1d55-451c-b3c6-431e568f136d.png"/>
Of course, this &#34;high leverage&#34; also means higher risks. If copper prices fall, the stock prices of these companies may also experience larger declines

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Bank of America Merrill Lynch pointed out that considering the huge demand for copper due to energy transformation and the AI investment boom, the copper supply-demand gap is expected to double by 2026. They have given buy ratings to multiple giants such as Zijin Mining and Jiangxi Copper, and believe that once copper prices rise, the profit growth of smaller, higher-cost enterprises like KGHM may be more significant

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Bank of America Merrill Lynch: Bullish on copper prices rising to $12,000, these types of copper mining companies have greater flexibility